Parliament in the United Kingdom recently convened to discuss the issue of lowering the VAT on ebooks sold in the country. Many publishing companies wanted to lower the 20% extra people pay for their digital ebooks. A few days ago they again decided not to reduce the fee, which is a boon for Amazon. The Bookseller reports David Gauke, the UK’s exchequer secretary, said the UK could not do this and remain in compliance with European Union law, which classes electronic media as services rather than goods and requires they be taxed at the higher rate.
Amazon is benefiting from the higher VAT fees because their head of European operations is based in Luxemburg, where the VAT has been recently lowered to only 3% on ebooks. This ensures that people who live in the UK who want to buy content will pay only the paltry 3% instead of the 20%.
The UK government is aware of these sorts of tactics and feels that it gives Amazon too much of a competitive edge. The EU has mandated that they will revise the way VAT is paid in 2015 so that buyers will pay the tax of their country rather than that of the vendor.